Understanding the crypto market cycle

The crypto market cycle is often viewed as sudden, chaotic, and rapid by those who look at it only on the surface. However, those who have stayed and experienced the market for a long time know that this cycle does have a pattern. Certain conditions may trigger a chain of events leading to a steady price rise, and then there are others that suddenly send the price plunging.

Understanding the workings and regular patterns of the crypto market cycle is critical for anyone who wants to earn through this market. As such, these trends are followed by the entire community, including whales, project developers, and chief marketing officers.

On that note, if you are new to the world of cryptocurrency, here is a quick guide to help you understand the fundamentals of the crypto market cycle.

Note: Crypto investments involve significant risk. Do not take the views mentioned here as financial advice. Please conduct thorough research before making any investment.

Phases of the crypto market cycle

The accumulation stage

The accumulation stage of the cycle is what you see right after a market fall. The prices of tokens are down, the buzz is minimal, and to the retail investor, it may seem that the crypto is dead. However, looking past the superficial dullness, there are people with foresight, people who are long-term believers in crypto, who hold.

In a way, this stage may be seen as a preparatory phase where the new narratives for that crypto are set. It's at this time that retail investors often silently exit the market, while the big players start to position themselves for the future stages of the cycle.

The expansion stage

The next stage is the expansion stage, where the market begins to recover. We start to see a rise in the prices of crypto assets. Some particular narratives that may dominate market sentiment – like RWAs and L2s – often begin to get a lot of attention during this phase. Moreover, the general mood in the market seems to improve.

The fast growth phase

The next phase is when market euphoria sets in. At this stage, the market sees a sudden and rapid upward price movement. New trends begin to explode. The fear of missing out creeps in, and everyone wants a slice of the market highs. Also, people often overestimate how long the upward trend in the market might last. The fast growth phase sometimes ends unexpectedly for many; the market might get overheated, and just one negative event might set off a downward chain reaction that leads to the next stage of the cycle.

The crash stage

In the last stage of the crypto cycle, the prices begin to decline. Emotions like fear and uncertainty begin to creep in. Many retail investors exit the market at this point. In a way, this phase can be seen as a reset phase that lays the ground for the next cycle.

Micro-cycles driven by narratives

Apart from the four key stages of the crypto market cycle discussed above, the market also sees some micro cycles driven by mega narratives like L2 solutions, NFTs, or AI agents.

A characteristic feature of these micro-cycles is that they are much quicker than the regular crypto market cycle discussed above. Hence, they create short spells of speculation and draw attention to the specific subject that evoked the cycle for brief periods.

Since these cycles are narrative-driven, people invest even if the fundamentals are not very strong. So, in many cases, the prices shoot up quickly only to crash equally fast. These micro-cycles are often short-lived, yet they play a significant role in shaping investor behavior and determining what the industry pays attention to.

This concludes our brief guide on the basics of the crypto market cycle.

Edited by Niladri Roy